Japan stayed out of the currency market for one month to late October, Finance Ministry data showed Tuesday, despite the yen's sharp appreciation fueling talk of intervention by the authorities after the psychological barrier of 150 to the U.S. dollar was breached.
The dollar tumbled about 3 yen in a short span of time on Oct. 3 in New York, an unusual move seen by some market players as the result of a yen-buying, dollar-selling operation by Japan. Japanese authorities neither confirmed nor denied they had stepped in.
The ministry data covered one month from Sept. 28 to Friday.
Finance Minister Shunichi Suzuki has said the government does not target a specific dollar-yen level in deciding whether to intervene, and that it is volatility that matters.
He has maintained that currencies should reflect economic fundamentals and move stably, and therefore the government will respond to excessive volatility.
The diverging monetary policies of the Bank of Japan and the U.S. Federal Reserve remain a major driver behind the yen's weakness. While the BOJ has allowed 10-year government bond yields to rise more than before under its yield cap program, the Fed has been raising interest rates aggressively to curb inflation, sending U.S. Treasury yields sharply higher.
The latest data release comes after the BOJ made its yield cap less rigid again on Tuesday but retained its monetary easing, leading the yen to weaken past 150 to the dollar ahead of a policy decision by the Fed on Wednesday.
A weak yen boosts overseas earnings for Japanese exporters but it also inflates import costs. The negative side has come to the fore in recent months as surging import costs of energy and raw materials have led price hikes to broaden and squeeze household budgets.
Japanese authorities usually step up their rhetoric in a series of verbal warnings before they decide to intervene. The BOJ conducts actual operations at the request of the Finance Ministry.
Japan spent around 9.2 trillion yen on three yen-buying, dollar-selling operations in September and October 2022 to slow the Japanese currency's "rapid" and "one-sided" declines.
During that period, Japan carried out interventions when the yen neared 146 and 151 to the dollar. While the interventions spooked market players in the short term, they did not reverse the yen's weakening trend.
With the yen breaching 150 in recent weeks again, currency markets remain vigilant against the possibility of intervention, preventing the yen from tumbling further, analysts say.
That caution is partly due to comments made by Vice Finance Minister for International Affairs Masato Kanda, Japan's top currency diplomat, indicating that even slow yen moves over a certain period of time, rather than rapid ones, can fall within the scope of "excessive volatility."
